Which of the Following Actions Would Be Most Likely to Reduce

question 60

Multiple Choice

Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and managers?

• A) Pay managers large cash salaries and give them no stock options.
• B) Change the corporation's formal documents to make it easier for outside investors to acquire a controlling interest in the firm through a hostile takeover.
• C) Beef up the restrictive covenants in the firm's debt agreements.
• D) Eliminate a requirement that members of the board of directors must hold a high percentage of their personal wealth in the firm's stock.
• E) For a firm that compensates managers with stock options,reduce the time before options are vested,i.e. ,the time before options can be exercised and the shares that are received can be sold.

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Definitions:

Industry

An industry is a group of companies that are related based on their primary business activities.

Local Currency Return

The return on an investment denominated in the currency of the country where the investment is made.

Stock Market

A public marketplace for buying and selling stocks, which represent ownership claims on businesses.

Total Revenue

The total amount of money generated by a company from its business activities, before any expenses are subtracted.